Video games are a hot Christmas item this year, and having three new game consoles released for the first time has left many shoppers with achingly empty wallets. But it's not just the cost of the systems that has risen recently—the games themselves are increasingly expensive as well. Forbes has released a revealing report explaining where all the money goes for a $60 title such as the popular Gears of War for the Xbox 360.
Between design, programming, and art assets, nearly half of a game's total development cost is already spent (see graph). Console license fees, retail markups and other miscellaneous costs just add to this figure—the exact figures are somewhat abstracted as games are typically sold to retailers at a fixed price below retail, and that is represented on the graph as a percentage of a $60 list price. Getting that investment back requires that game publishers sell large quantities of their games—Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it develops to make a profit. Unfortunately, due to console scarcity and higher prices, next-gen console sales are not yet at a point where those numbers are an inevitability. Microsoft claims that 10 million Xbox 360s will be sold by the end of this year, while Sony's most optimistic estimates put only 2 million PS3s in homes by the same time frame. Many game companies are waiting for the next generation to become a bit more ubiquitous before starting development on these platforms.
Cost breakdown for next-gen games. Data from Forbes.com.
Of course, Forbes isn't the first to point out the exponentially rising costs of development for next-gen games. All those high-poly models and high-resolution textures come at a price, as more artists, developers, and testers are needed to produce a finished product. New games continue to up the ante in terms of graphical polish and special effects, and a game developed on last year's budget simply won't be able to compete in a marketplace where shinier is often considered better.
High video game costs are not entirely a new thing. Back in the cartridge days, the extra cost of static memory pushed prices for popular games such as Street Fighter II on the SNES to the $60 level, which adjusting for inflation would be more than $82 today. Sega's Fantasy Star IV originally retailed for $80 in 1994. Still, gamers have gotten used to a typical price of $50 for the last generation of console games, but those days appear to be over.
The new prices don't appear to be dampening enthusiasm for games in general, however. With the new hotness come steep discounts on the last generation of systems, and games for those platforms have been selling briskly. In addition, portable gaming is hitting new records—the Nintendo DS outsold all other platforms last month, shipping 918,000 units in the US alone. Overall, the game industry appears healthier than ever. But will rising development cost shift the focus away from the "latest and greatest" desktop consoles and towards other, more lucrative platforms?
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